The Retail Outlet has 6,000 shares of stock outstanding with a book value of $1.00 per share. The current market value of the firm is $420,000. The balance sheet shows retained earnings of $234,000. The company just announced a 2-for-1 stock split. What will the common stock account balance be after the split?

Question

Quizplus · Accepted Answer

The common stock account balance reflects the par value of the shares outstanding and is not affected by a stock split. Since the stock split doubles the number of shares but does not change the total book value of equity, the common stock account balance remains at $6,000 (6,000 shares * $1.00 per share).

The Retail Outlet Has 6,000 Shares of Stock Outstanding with a Book